Case in Point

Greedy company president sinks family-owned firm

May/June 2016

ByRobert J. Gunderson, CFE

In early 2013, employees of a trucking company were trying to use their health care benefits, but their doctors and hospitals were rejecting them. Their insurance carrier was denying their claims. Their paychecks showed their employer had been deducting their shares of medical insurance premiums, but their insurance cards were worthless.

The employees notified the police who discovered a broad pattern of fraud and embezzlement in the company — going back to mid-2010. Eventually, 584 theft-related counts — including 382 felony charges — were filed against the company's president. The health insurance coverage issue was just the tip of the iceberg.

During an extensive investigation, a state trooper from the Bureau of Criminal Investigations found employees' paychecks that showed the company was withholding funds for a number of items, including medical insurance, 401k contributions and 401k loan repayments. The investigation found that the company actually was taking this money and stashing it in a company checking account and using it for other expenses. This misallocation, of course, caused a lapse in payment of insurance premiums, shortages in individual 401k funds and non-payments of 401k loans.

The investigation determined that the company president's dishonest actions affected 131 victims. This payroll scheme was his last desperate effort to shore up company finances because he'd been siphoning off company funds since 2010.